Prepared
Statement of the Federal Trade Commission
on the Fair Credit
Reporting Act
Before
the House Committee
on Financial Services
Washington, D.C.
July 9, 2003
Mister Chairman and members of the Committee,
my name is Timothy J. Muris, and I am Chairman of the Federal
Trade Commission ("Commission" or "FTC"). I am pleased to
present the Commission's views on amending the Fair Credit
Reporting Act ("FCRA").(1)
The Commission endorses the FCRA amendments and other statutory
changes proposed by the Treasury Department on June 30, 2003,
including permanent renewal of the uniform national standards
in Section 624 of the FCRA.
The national consumer reporting framework
the FCRA established has played a central role in the expansion
of consumer credit, which in turn has contributed so much
to the nation's economy. Making the uniform national standards
permanent would help ensure the continued effectiveness of
our national consumer reporting system.(2)
At the same time, it is critical that our
credit system protect the rights of consumers in the privacy,
security, and accuracy of their financial information. More
types of businesses are using consumer reports than ever before.
The Commission supports the legislative amendments proposed
by the Treasury Department, which provide important protections
for consumers. The proposals include:
- provisions aimed at helping consumers
prevent, detect, and mitigate the harms that result from
identity theft;(3)
- free annual access to consumer reports
and better information about credit scores for consumers;
and
- enhanced rights to adverse action notices
that better comport with modern credit practices.
The Commission recommends two additional
FCRA amendments: (1) a modest strengthening of the duties
of information furnishers and (2) changes to the obligations
of employers when investigating employees.
I. Economic Growth,
Consumer Reporting, and the FCRA(4)
The enactment of the FCRA in 1970, and
its amendment in 1996, has fostered the development of our
modern credit system. Consumer spending accounts for over
two-thirds of U.S. gross domestic product, and the wide availability
of affordable credit drives this spending.(5)
In 2001, 75 percent of U.S. households participated in the
consumer and mortgage credit markets.(6)
Well-functioning credit markets are an essential component
of economic prosperity.
The modernization of consumer reporting
has played a key role in providing U.S. consumers with rapid
access to consumer credit. Federal Reserve Chairman
Alan Greenspan noted the benefits of this system to both consumers
and lenders in his April testimony to this Committee.(7)
The development of a national consumer reporting system, with
its sophisticated risk models and automated underwriting,
has contributed greatly to making credit more widely, inexpensively,
and rapidly available.(8)
The national system also has narrowed the gap in credit availability
between high and low income consumers.(9)
The information in the consumer reporting
system is derived from creditors, insurers, and others (also
called "furnishers") that voluntarily report account histories
to consumer reporting agencies ("CRAs").(10)
The flow of information between furnishers, CRAs, and consumer
report users, as governed by the FCRA, facilitates more expeditious
and accurate credit decisions.(11)
II. Proposed Legislative
Action
The Commission supports the Treasury Department
proposals for amending the FCRA. We believe these proposals
would (1) ensure the continuing viability of the FCRA's uniform
national framework that has been a cornerstone of our consumer
credit-driven economy, and (2) improve the FCRA to the benefit
of consumers, especially in preventing and mitigating the
ravages of identity theft and other fraud. We also support
the related initiatives to combat identity theft, and recommend
two further legislative refinements to the FCRA.
A. Making the FCRA's
uniform national standards permanent
The FCRA currently provides uniform standards
and preempts state laws with respect to (1) the prescreening
of consumer reports, (2) the time within which CRAs must investigate
consumer disputes, (3) the adverse action duties of users
of consumer reports, (4) the duties of furnishers, (5) the
age of information allowed in consumer reports, (6) the exchange
of information among affiliated companies, and (7) certain
consumer disclosures.< The impact of removing the uniform
national standards might not be the same for each standard,
and of course would depend on what actions individual states
decided to take. Nonetheless, the entire package of national
standards mandated by Congress in 1996 has proven effective.
Accordingly, the Commission recommends that all of the standards
be made permanent.
Because information reporting is voluntary,
the entire system depends on cooperation. The 1996 amendments
established a balance - imposing important responsibilities
on furnishers with respect to the information they provide,
but not making those duties so onerous that furnishers report
more selectively or stop entirely. Allowing the uniform national
standards to expire would risk upsetting this balance.
The Commission believes that the national
character of our credit markets is a powerful argument for
retaining the uniform standards. The current system functions
well, and we believe there is no compelling justification
for fundamental changes. The FCRA forms the baseline of consumer
protections that the marketplace has now incorporated into
its thinking and behavior.
This is not to say that the FCRA is perfect;
in the Commission's view, the amendments discussed in this
testimony would improve the Act. The Commission believes,
however, that both businesses and consumers would best benefit
from improvements made at the national level. Indeed, the
Commission has a number of recommendations to strengthen the
expiring national standards. We propose, among other things,
improving the prescreening process to enhance opt-out rights,
streamlining the investigation duties of CRAs that resell
consumer reports, expanding consumers' rights to adverse action
notices, requiring furnishers to reinvestigate disputes received
directly from consumers, and improving consumer disclosures
with respect to credit scoring.
To the extent that states are allowed to
promulgate different standards than those in the FCRA, the
resulting inconsistency could undermine the value of predictive
models without a countervailing consumer benefit. For example,
one result might be a reduction in the information available
to the consumer reporting system. A robust credit information
database is critical to creditors offering credit as broadly
as possible at the lowest cost.(12)
In general, the credit markets are best positioned to determine
the type and quantity of information needed to make credit
decisions.
Moreover, if states could pass differing
laws that imposed additional duties on furnishers, who now
provide information voluntarily, fewer furnishers might report
or they might report less information, thereby degrading the
quality of the data upon which decisions are made. Similarly,
if states were free to shorten reinvestigation time limits,
furnishers might determine that their reinvestigation duties
were too onerous and simply exit the system. By the same token,
state enactment of shorter data obsolescence periods, governing
how long negative information can continue to be reported,
would necessarily reduce the amount of data in consumer reports.
The result would be to restrict creditors' ability to consider
information that may be predictive of risk.(13)
Preliminary research indicates that allowing
the national standards to expire could have deleterious effects
for consumers. One study measures the impact of different
scenarios of possible state regulation on credit score modeling
and, ultimately, on the cost and availability of credit. The
results suggest that the hypothesized changes in FCRA standards
would alter most consumers' credit scores and lower the predictive
power of scoring models, leading to increased delinquency
rates or (to maintain current delinquency rates) restricted
availability of credit.(14)
B.Improving the FCRA - the
Treasury Department's proposals
In conjunction with making permanent the
uniform national standards, the Commission supports the following
proposals to amend the FCRA, which would provide important
protections for consumers.
1. Access to free consumer reports
and credit score information
Currently, under the FCRA consumers are
entitled a free consumer report only under limited circumstances.(15)The
Commission supports amending the FCRA so that consumers have
the right to request a free consumer report annually. In addition,
the Commission supports a requirement that the report be accompanied
by information on how credit scores are derived and what consumers
can do to improve them.(16)These
proposals would (a) enhance consumers' ability to discover
and correct errors, thereby improving the accuracy of the
system; (b) educate consumers about the importance of consumer
reports and scores and how to improve them; and (c) in some
cases provide an early alert to identity theft victims about
crimes committed in their names. In an environment with consumer
reports and scores used more and more frequently in eligibility
and pricing decisions for a myriad of products and services,
consumers' knowledge of their credit records is crucial.
2. National fraud alert system
The Commission supports standardizing the
means by which consumers who reasonably suspect they have
been or may be victimized by identity theft, or who are military
personnel on active duty away from home, can place an alert
on their credit files. The alert would put potential creditors
on notice that they should proceed with caution when granting
credit in the consumer's name. The proposal would also codify
and standardize the "joint fraud alert" policy whereby an
identity theft victim only needs to call one national CRA
to place a fraud alert and obtain a free consumer report from
all three. The three major CRAs voluntarily follow these procedures
now (except for the military alert). The Commission supports
the codification of this system in the FCRA.
3. Identity theft account
blocking
The Treasury Department's proposal
would require CRAs immediately to cease reporting ("block")
allegedly fraudulent account information on consumer reports
when the consumer submits a police report or similar document,
unless there is reason to believe the report is false. Blocking
would mitigate the harm to consumers' credit record that can
result from identity theft. We understand that the three major
CRAs do this voluntarily now, and recommend that it be codified
in the FCRA.
4. Reinvestigation duties
with respect to resellers
Persons who purchase consumer reports
for resale (also known as "resellers") are covered by the
FCRA as consumer reporting agencies and have all the obligations
of other CRAs, including the duty to reinvestigate information
disputed by consumers. Typically, resellers combine information
from the three major CRAs (also sometimes referred to as "repositories"
in this context) to produce reports for mortgage lenders.
Resellers are an important source of consumer reports, but
the current FCRA dispute obligations of CRAs and furnishers
do not work well when applied to resellers. The Commission
supports amending the FCRA to better address reinvestigation
duties when a reseller is involved. If a consumer disputes
information in the report, the reseller may meet resistance
in getting the creditor who originally furnished the information
to investigate the dispute, because the creditor has no relationship
with the reseller. Yet, if the reseller sends the dispute
to the relevant repository, that repository currently has
no legal obligation to reinvestigate, because the dispute
did not come directly from the consumer.(17)
The Commission supports an amendment that would require resellers
to submit disputes to the originating repository and the source
furnisher to investigate these disputes. Such an amendment
would ensure that the dispute process functions more efficiently.
5. FTC rulemaking on adverse action
notices
The FCRA requires that when adverse action
is taken against a consumer based even in part on a consumer
report,<(18)<
the user must notify the consumer of (1) the identity of the
CRA from which the creditor obtained the report; (2) the right
to obtain a free copy of the report; and (3) the right to
dispute the accuracy of information in the report. Adverse
action notices are a critical first step in the "self help"
system for correcting inaccuracies in the consumer reporting
system. Consumers are in the best position to know whether
the information in their consumer report is accurate. The
adverse action notice informs them that the reason for denial
was based, at least in part, on the report. With the notice,
consumers have specific incentives to correct inaccurate data.
Currently, the definition of "adverse action"
for credit transactions is imported into the FCRA from the
Equal Credit Opportunity Act ("ECOA").(19)
Under the ECOA definition, there is no adverse action in many
situations when the consumer is offered less favorable terms,
such as a higher interest rate, because of information in
her consumer report. For example, there is no adverse action
when the consumer accepts a "counteroffer" that includes those
less favorable terms. The ECOA definition does not adequately
address modern credit markets, in which consumers do not necessarily
apply for specific credit terms, but rather for the best terms
for which they can qualify. In turn, creditors offer terms
tailored to the consumer's risk profile, which may often mean
a higher price than would otherwise have been the case but
for the consumer's consumer report. Yet, under current law,
consumers who accept this higher price would not receive an
adverse action notice, and thus would never know about a problem
in the consumer report that caused the higher price. We support
the proposal to grant specific rulemaking authority to the
FTC to address the definition of adverse action in credit
transactions to better reflect the modern credit market.(20)
6. Improving opt-out notices for
pre-screened offers
Prescreened offers provide many benefits
for consumers, and can enhance competition, leading to greater
credit availability, better terms, and lower costs for consumers.(21)
At the same time, the 1996 amendments appropriately gave consumers
the right to opt-out of receiving such offers, and required
that creditors and insurers clearly and conspicuously disclose
this right in the offer itself. The Commission has observed
that these notices in many cases have been buried in locations
difficult to find, and that the language of the notice is
often difficult to understand. The Commission supports the
proposed amendment to the FCRA directing the Commission and
bank regulators to clarify and strengthen the opt-out notice
requirements. A regulatory proceeding would allow the agencies
to provide more specific direction on this requirement, based
on empirical evidence of the costs and benefits of various
disclosure options and their effectiveness in communicating
to consumers.
C. Other Treasury
Department legislative proposals
The Commission also supports the non-FCRA
proposals to prevent identity theft, limit the damage from
that crime, and help victims restore their reputations.
1. Truncation of credit and
debit card receipts
In many instances, identity theft
results from thieves obtaining access to card numbers on receipts.
This source of fraud could be reduced by requiring merchants
to truncate (i.e., print less than the full card
number on the receipt). The use of truncation technology is
becoming widespread, and some card issuers already require
merchants to truncate. The Commission supports requiring truncation,
but recommends that the law be phased in over a period of
time to allow for the replacement of existing equipment.
2. Enhanced criminal penalties
for identity theft
One way to deter identity theft is
to make it easier to prosecute. Legislation proposed last
year would have created a new crime of "aggravated identity
theft," with stiff penalties and streamlined proof provisions.
The Commission continues to support that proposal.(22)
3. "Red flag" indicators of identity
theft
The Treasury Department's proposal would
direct banking regulators to identify and maintain a list
of "red flag" indicators of identity theft and provide the
list to financial institutions they regulate. Banking regulators
also would be required to examine the institutions for use
of red flag indicators, with authority to assess fines when
an institution's failure to use the indicators causes losses
to customers. The goal of this proposal is to give financial
institutions up-to-date information on identity theft patterns
and practices and to encourage them to take action to prevent
this crime. The proposal seeks to achieve this goal through
the bank examination process, in which the regulators and
the regulated entities can share information.(23)
The Commission supports this proposal.
4. Information sharing by debt collectors
and creditors with identity theft victims
Some identity theft victims have complained
that debt collectors and creditors refuse to tell them about
accounts opened in their names. The Treasury Department proposal
would authorize debt collectors and creditors to share with
a victim the information they have on allegedly fraudulent
accounts in the victim's name. This information may help victims
clear their names.(24)
5. Keeping fraudulent debt
from being transferred or reported
The Treasury Department proposes legislation
requiring a debt collector to notify the creditor when it
learns that an account it is collecting is fraudulent. In
turn, a creditor, once it learns that an identity theft caused
a debt, would be prohibited from selling or transferring the
debt for collection, and from reintroducing the fraudulent
information into a consumer report. Some identity theft victims
complain that bad data reappear on their consumer reports
long after they have had them removed, and it appears that
creditors may be partly responsible - they may sell debts
or place them for collection, even after they should know
they are fraudulent.
D. Improving the FCRA - the
Commission's additional proposals
1. Duty of furnishers to respond
to disputes directed to them
Under Section 623(b) of the FCRA, furnishers
have a duty to investigate only disputes that are sent to
them from a CRA.(25)
Unfortunately, many consumers who learn about errors in their
report may contact the furnisher directly, and may not know
that they must notify the CRA to trigger the furnisher's obligation
to investigate. The result may be confusion and delay in resolving
disputes. The Commission recommends that the FCRA be amended
to provide that disputes raised with furnishers receive the
same treatment as disputes filed with a CRA.
2. Clarification of the application
of the FCRA to investigations of employee misconduct
The Commission continues to recommend that
Congress amend the FCRA to clarify the duties of employers
with respect to third party investigations of employees.(26)
Since its inception, the FCRA has applied to the collection
and use of certain information for employment purposes, including
for workplace misconduct investigations. The 1996 amendments
specified that an employer cannot (1) obtain an employee's
consumer report for employment purposes without written authorization
from the employee; or (2) take adverse action based on the
report without giving a copy of the report to the consumer
with a description of the employee's FCRA rights, e.g.,
to dispute errors.
These requirements have been criticized
by employers and those who perform investigations on employers'
behalf as chilling their ability to investigate wrongdoing.
The Commission shares the concern that the FCRA not unduly
hinder workplace investigations, and endorses prudent amendments
to remove those procedural requirements that unnecessarily
hamper such investigations.(27)
The Commission believes, however, that Congress should retain
the other important privacy and procedural rights the FCRA
provides when third parties conduct workplace investigations
of individuals who have been accused of misconduct.(28)
III. Conclusion
In 1970, Congress recognized that "consumer
reporting agencies have assumed a vital role in assembling
and evaluating consumer credit and other information on consumers."(29)
While Congress in 1970 may not have envisioned the specific
ways in which consumer report information would facilitate
the development of products and services that ultimately benefit
the American consumer, the thirty-three years since passage
of the Act have fully demonstrated the wisdom of Congress
in enacting the FCRA. The 1996 amendments improved the FCRA's
carefully balanced framework, making possible the benefits
that result from the free, fair, and accurate flow of consumer
data. The consumer reporting industry, furnishers, and users
can all rely on the uniform framework of the FCRA in what
has become a complex, nationwide business of making consumer
credit available to a diverse, mobile American public.
The Federal Trade Commission supports making
permanent the uniform standards of Section 624 to ensure the
continuation of these critical national standards. At the
same time, we urge the Congress to improve the FCRA and provide
other consumer protections as outlined above. The Commission
looks forward to working with the Committee on these proposals.
Endnotes:
1. The written statement
represents the views of the Federal Trade Commission. My oral
presentation and responses are my own and do not necessarily
reflect the views of the Commission or of any other Commissioner.
2. It is important to
keep in mind that, notwithstanding its title, the Fair Credit
Reporting Act has always covered more than what are conventionally
termed "credit reports." It applies generally to any information
collected and used for the purpose of evaluating consumers'
eligibility for products and services that they want. Thus,
the FCRA has always applied to insurance, employment, and
other non-credit consumer transactions. See FCRA
§ 602(b) ("It is the purpose of this title to require that
consumer reporting agencies adopt reasonable procedures for
meeting the needs of commerce for consumer credit, personnel,
insurance, and other information . . . ."). The focus here
will be on credit reporting, but the same basic regulatory
structure applies to all consumer reports. Throughout this
testimony, we will refer to "consumer reports" rather than
"credit reports," although the terms are used interchangeably
and either usage is correct.
3. Identity theft occurs
when someone commits fraud or other unlawful activity by using
another person's identifying information, such as date of
birth, social security number, or credit account numbers.
The fraud could include applying for or using credit in another's
name, obtaining bank loans, employment, or utility services
(including cell phones), or similar illegal conduct using
the identity of the consumer whose information was misappropriated.
4. For a more extended
discussion and detailed history on these related topics, please
see the Commission's testimony last month before
the Subcommittee on Financial Institutions and Consumer Credit
at http://www.ftc.gov/os/2003/06/030604fcratestimony.pdf.
5. In 1946, total outstanding
consumer credit stood at $55 billion; by 1970, the time of
enactment of the FCRA, it had grown to $556 billion. [Figures
adjusted for inflation.] Today, it is $7 trillion. <See
Fred H. Cate, Robert E. Litan, Michael Staten, and Peter
Wallison, "Financial Privacy, Consumer Prosperity, and the
Public Good: Maintaining the Balance," AEI-Brookings Joint
Center for Regulatory Studies, March 2003, at 1, 8.
6. Id. at 2.
7. "So it is clearly
in the interests of consumers to have information continuously
flowing into [credit] markets. It keeps credit available to
everybody, including the most marginal buyers. It keeps interest
rates lower than they would otherwise be because the uncertainties
which would be required otherwise will not be there." Remarks
following testimony by Alan Greenspan, Chairman of the Board
of Governors of the Federal Reserve System, April 30, 2003,
House Financial Services Committee, at ______.
8. "By most accounts,
the consumer credit marketplace in the United States is the
envy of the world. In 30 short years, balkanized local credit
card markets, characterized by high and largely undifferentiated
prices on credit, very subjective application processes, and
limited access, have evolved into a national consumer credit
marketplace distinguished by dynamic competition among lenders
and broad participation by most American consumers." Information
Policy Institute, "The Fair Credit Reporting Act: Access,
Efficiency & Opportunity - The Economic Importance of
Fair Credit Reauthorization" (June 2003; hereafter, "IPI Report")
at page 5. See also Testimony of Michael A. Turner,
Ph.D, President and Senior Scholar, The Information Policy
Institute, before the House Committee on Financial Services,
Subcommittee on Financial Institutions and Consumer Credit,
May 8, 2003 (hereafter, "Turner testimony").
9. Preliminary research
indicates that advances in risk modeling sophistication and
use have led to increased economic activity (such as homeownership
rates and use of credit) and especially significant benefits
for disadvantaged groups. For example, from 1970, when the
FCRA was passed, to 2001, the percentage of families in the
lowest income quintile with a credit card increased from 2
percent to 38 percent. IPI Report, at 5; Turner testimony,
at 4. See also, Cate, "Privacy, Consumer Credit,
and the Regulation of Personal Information," in The Impact
of Public Policy on Consumer Credit, Thomas A. Durkin
and Michael E. Staten, eds. (Boston: Kluwer Academic Publishers,
2002), at 235-36.
10. CRAs are also referred
to "credit bureaus."
Each of the three national CRAs (often referred to as the
"Big 3") receives more than 2 billion items of information
each month. See "An Overview of Consumer Data and
Credit Reporting," Federal Reserve Bulletin, February
2003, at 49.
11. CRAs issue between
2 and 3 million consumer reports each day. See http://www.cdiaonline.org/about.cfm.
12. IPI Report, at pages
40-53. See also Turner testimony, at 4: "Full-file
credit reporting, made possible by the preemptive provisions
of the FCRA, enables lenders to distinguish different degrees
of risk far better than older, less sophisticated techniques."
13. If the states had
different obsolescence standards, CRAs would have to implement
different retention and deletion procedures for consumers
in each such state, and when a consumer moved from one state
to another, the file would have to be adjusted. Given the
high degree of transience and consumers with more than one
address (e.g., students or retirees), the effect
of one state's enactment of a more restrictive obsolescence
standard would inevitably affect consumers beyond that state's
borders. While CRAs could adopt the most restrictive obsolescence
standard and apply it nationally for ease of compliance, that
would result in a costly loss of data to lenders nationwide.
Those lenders who operate only in the state with a restrictive
obsolescence standard would lose data necessary to assess
risk accurately - they would not be able to spot the poor
risks as easily, which would increase their credit losses,
requiring them to raise prices for everyone, including the
good risks. Multistate lenders might be able to charge lower
prices, but only by spreading their increased losses to their
customer base in other states, with the net effect that consumers
elsewhere would subsidize the consumers in the state with
the most restrictive obsolescence standard.
14. IPI Report, at 45-51.
The state law changes hypothesized included changes to the
FCRA standards for prescreened offers, furnisher obligations,
and the content of consumer reports.
15. Currently, free
reports are available pursuant to the FCRA when the consumer
suffers adverse action, believes that fraudulent information
may be in his or her credit file, is unemployed, or is on
welfare. See FCRA § 612. In addition, a small
number of states require the CRAs to provide free annual reports
to consumers at their request. Absent one of these exceptions,
consumers must pay a statutory "reasonable charge" for a file
disclosure; this fee is set each year by the Commission and
is currently $9. See FCRA § 612(a).
16. Scores are widely
used by creditors and insurers to evaluate consumers, and
are based on analyses of historical consumer credit data,
which allow creditors to develop models that help them predict
the risk of default of a particular consumer. (The products
are thus sometimes referred to as "risk scores" or "credit
scores.") When the consumer applies for credit or other goods
or services, the scoring programs that are developed from
the complex analysis of past data compare the scoring factors
to the individual information of the particular consumer,
with the result reflected in a score that is generated for
that application.
17. If the consumer
is told by the reseller that he must dispute the information
to the source repository, this delays the dispute process.
Time is often of the essence in the case of a mortgage application.<
18. "Adverse action"
generally means any action that is adverse to the interests
of the consumer, and can include a denial of credit, denial
of an apartment rental, or denial of a retail purchase by
check. In the insurance context, "adverse action" means "a
denial or cancellation of, an increase in any charge for,
or a reduction or other adverse or unfavorable change in the
terms of coverage or amount of, any insurance." In the employment
context, the term includes "a denial of employment or any
other decision for employment purposes that adversely affects
any current or prospective employee." See FCRA § 603(k).
19. The ECOA adverse
action definition is not imported into the
FCRA with respect to insurance or other noncredit transactions.
20. Currently, the
Commission has no rulemaking authority with respect to the
FCRA.
21. IPI Report, at 54-59.
22. Testimony of Howard
Beales Before the Technology, Terrorism, and Government Information
Subcommittee of the Senate Judiciary Committee, July 9, 2002,
at http://www.ftc.gov/
os/2002/07/bealesidthefttestimony.htm.
23. Attention to identity
theft "red flags" would seem readily amenable to the bank
examination process. Any exam requirements should remain flexible
to respond to unforeseen circumstances and changes in the
pattern of identity theft.
24. Identity theft
victims tell us that it is often helpful to obtain application
information on fraudulent accounts as a part of their own
investigation into the circumstances of the theft. For example,
they might recognize the handwriting on the application or
be able to prove that it is not their own.
25. In practice, furnishers
sometimes investigate disputes received directly from consumers
because they are required in some circumstances not to report,
and to correct, inaccurate information. See FCRA
§§ 623 (a)(1) and (2). But furnishers have no affirmative
obligation to investigate these disputes. Thus, if a consumer
contacts the creditor only by telephone to dispute, and the
creditor previously supplied to the consumer an address to
submit disputes, it is not liable under FCRA Section 623(a)(1)
for continuing to report this information, even if it is inaccurate.
26. The Commission testified
to this effect before this Committee in 2000. See Testimony
of Debra Valentine Before the Subcommittee on Financial Institutions
of the House Banking and Financial Services Committee, May
4, 2000, at http://www.ftc.gov/os/2000/05/fcratestimony.htm.
The interaction of the FCRA and third-party investigations
of workplace misconduct is complex. To understand fully the
context and implications of proposed changes to the FCRA,
we urge careful consideration of the issues and legal analysis,
which were summarized in the Commission's earlier testimony.
The Commission would appreciate the opportunity to work with
this Committee and others in Congress to craft an appropriate
resolution of this issue.
27. In its 2000 testimony,
the Commission recommended that Congress amend the FCRA to
remove the requirements that employers (1) obtain the consent
of an employee under investigation before requesting the employee's
consumer report, (2) give the employee a copy of the consumer
report before taking adverse action based on the report, and
(3) notify the employee that an investigative consumer report
is being prepared. The Commission also recommended that the
FCRA be amended to provide that a CRA that prepares an investigative
consumer report on an employee suspected of misconduct need
only provide the employee with a summary of the "nature and
substance" of the report, rather than a full disclosure of
all information in the employee's file.
28. These provisions
include the obsolescence provisions of Section 605; the reasonable
procedures requirements of Sections 606 and 607; the Section
613 requirement regarding accuracy of public record information;
and the adverse action notice requirements of Section 615.
29. Section 602(a)(3)
of the FCRA.
|